Housing

• In a judgment of March 10, 2022, the Plenary Session of the Constitutional Tribunal unanimously partially upheld the appeal of unconstitutionality filed by more than fifty Representatives of the People’s Party Group in the Representatives’ Congress against various Articles of Act 11/2020 of 18 September on urgent measures in matters of rent containment of in housing lease contracts and amending Act 18/2007, Act 24/2015 and Act 4/2016 relating to the protection of the right to housing (known as the Catalan Rent Control Act).

• This Act, applicable to home rental agreements signed in areas with a tense residential market, established a case-by-case limit on the rental costs based on the last rental agreement or the Rental Price Reference Index.

• The judgment, which will take effect after its publication in the Official State Bulletin, declares Articles 1, 6 to 13, 15 and 16.2; Additional Provisions One, Two and Three; Transitional Provision One and Final Provision Four, letter b) and Additional Provision Four as unconstitutional, null and void. It also declares Final Provision Three as unconstitutional.

• Consequently, it affects the entire contents of the Act referring to the containment of rents, maintaining the validity solely of the parts referring to the declaration of areas with a tense residential market and the Home Rental Price Reference Index.

• The judgment declares that these precepts represent an invasion by the Autonomous Community of Catalonia of the competences of the State recognised by Article 149.1.8 of the Spanish Constitution, which reserves the power of establishing the criteria of general organisation of the private contracting sector in the autonomous territories which have their own legislation to the State. This is understood as a structural guarantee of the single market and represents a limit in itself (resulting directly from the Constitution) on the regulatory diversity which can be introduced by autonomous community legislators.

• Finally, the judgment limits the effects of the declaration of unconstitutionality on the basis of the principle of legal certainty, and the effects will be pro futuro, thus maintaining the terms of home rental agreements signed prior to the moment this decision was made.

This regulation will be applied to areas with a housing market that is under pressure. For a municipality to be declared as an area with a housing market under pressure, any one of the following characteristics must be met:

• The rental price must be obviously higher than the Catalan average.
• The average rent must be greater than 30% of the normal income for the family unit or the average rent for people under 35 years old.
• The rent must have an accumulated inter-annual growth of three points over the RPI in the last three years.

To begin with, the housing markets of 61 municipalities have been declared under pressure for one year. The Town Councils of these municipalities must make a new declaration before the year is out to be able to continue applying the law. If a town meets any of the previous characteristics, the Town Council may request it be considered a housing market under pressure.

The 61 municipalities that have been declared an area with a housing market under pressure are:

Badalona, Barberà del Vallès, Barcelona, Blanes, Calafell, Castellar del Vallès, Castelldefels, Cerdanyola del Vallès, Cornellà de Llobregat, Esplugues de Llobregat, Figueres, Gavà, Girona, Granollers, L’Hospitalet de Llobregat, Igualada, Lleida, Manlleu, Manresa, Martorell, El Masnou, Mataró, Molins de Rei, Mollet del Vallès, Montcada i Reixac, Montgat, Olesa de Montserrat, Olot, Palafrugell, Pallejà, Pineda, El Prat de Llobregat, Premià de Mar, Reus, Ripollet, Rubí, Sabadell, Salou, Salt, Sant Adrià de Besòs, Sant Andreu de la Barca, Sant Boi de Llobregat, Sant Cugat del Vallès, Sant Feliu de Guíxols, Sant Feliu de Llobregat, Sant Joan Despí, Sant Just Desvern, Sant Pere de Ribes, Sant Vicenç dels Horts, Santa Coloma de Gramenet, Santa Perpètua de la Mogoda, Sitges, Tarragona, Terrassa, Tortosa, El Vendrell, Vic, Viladecans, Vilafranca del Penedès, Vilanova i la Geltrú and Vilassar de Mar.

• If the property has been rented in the last five years, the price of the previous contract and the reference rate must be checked and the lower price must be chosen.
• If the property has not been rented during the last five years, the rent cannot exceed the reference rate.
• If the previous tenant was a relative and the price was very low, it can be raised to the reference rate.

An increase of up to 5% of the price can be agreed if, at least, three requirements are complied with from a series of improvements the law covers. Such improvements include, for example, that the property is furnished, it has a cooling or heating system, car park or communal areas, among others.

This information must be stated in the advertisements for the property as well as the new contract.

The maximum price the tenant must pay is calculated from the rental price reference rate. It is a Housing Agency of Catalonia rate that calculates the average of the price per square metre of rentals in a specific area. This rate is calculated from the bonds deposited with Incasòl. It takes into account the square metres and other aspects such as year of construction, state of the property, energy efficiency and whether it has a lift, storeroom or is furnished, among others. The reference rate for your home can be calculated here.

All contracts are subject to the rental price regulation law except the following, even if the affected area has been declared a housing market under pressure:

• Contracts signed before 1 January 1995, in other words, old rents.
• Contracts with an official protection system.
• Contracts that form part of housing integrated into public social rental mediation or inclusion housing networks.
• Nor will it be applied to contracts made prior to this law coming into force. In this case, the contracts will continue to be governed by what the previous legislation establishes. However, if these contracts are renegotiated, the new law will only be applied if the renegotiation includes an extension to the duration of the contract or modification of the rent. 

If improvements have been made to the habitability, security, comfort or energy efficiency, the rental price may be increased. The increase is calculated taking into account the amount invested, deducting the subsidies received, and adding interest rate (6%). Under no circumstances, however, may the increase exceed 20% of the reference rate.

Furthermore, the work carried out must be for improvements, not maintenance, and have to be justified by invoices.

For housing built in the last five years or that have undergone a major renovation, the new price may reach the higher level of the reference rate. Bear in mind that this law is not applied during the first three years.

The new contract must include:

• The reference rate value (€/m2 accompanied by the document that the rental price index system generates).
• If the rent has been increased or reduced by 5%, the reasons must be explained.
• If the rent is determined by a previous contract, the initial price of the previous contract must be stated (updated according to the Competitiveness Guarantee Index).

If the owner is charging rent above that set out by the law, a refund can be claimed with the relevant interest, plus 3 points (in total, 6% interest).

Furthermore, the law establishes sanctions with fines ranging between 3,000 and 90,000 euros depending on the severity of the breach.

Major (between 9,000 and 90,000 euros)

• Rental of housing breaching the criteria for determining rent as established by law.
• Setting rent that exceeds the maximum established by 20% or more.
• Hiding from the tenant that the housing is subject to a rent restriction system.
• Omitting information regarding the reference rate or the rental amount of the previous contract.

Minor (between 3,000 and 9,000 euros)

• Not stating the rate and/or price of the previous contract when advertising the housing.
• Not including the contract or providing documentation on the price rate or previous contract or falsifying it.
• Setting rent that exceeds the maximum established by at least 20%.

If the previous contract did not include general costs, such as, for example, the Property Tax rate, council tax or owner association costs (both the concept and the amount), they cannot be included in the new contract. This is established in Decree 50/2020, of 9 December.

However, if the previous contract did set out these costs or if the flat was not previously rented, the parties may agree that the tenant will pay the general costs. If this is the case, for each payment detailed information on the amount of rent and the amount of the costs assumed by the tenant must be recorded. Each January, the lessor must provide the lessee with the receipts of the payment of costs assumed by the tenant during the previous year. If these costs are less than those agreed, the owner must refund the corresponding difference.